Skip to main content

(Note: Pam Martens has provided written authorization to the diarist to republish this post in its entirety for the benefit of the Daily Kos community.)

Senator Sherrod Brown Drops a Bombshell in Mary Jo White’s Hearing

By Pam Martens
Wall Street On Parade
A Citizen Guide to Wall Street
March 13, 2013

Mary Jo White, Testifying at Her Confirmation Hearing for SEC Chair on March 12, 2013; Her Husband, John W. White, Partner at Cravath, Swaine & Moore, Sits to Her Left.
Mary Jo White, Testifying at Her Confirmation Hearing for SEC Chair on March 12, 2013; Her Husband, John W. White, Partner at Cravath, Swaine & Moore, Sits to Her Left

Americans learned for the first time on March 6 of this year that the highest law enforcement agent in our country, Attorney General Eric Holder, weighs economic interests when deciding whether to enforce our Nation’s laws against criminal wrongdoers like the too-big-to-fail banks.

The spectacle of warped law enforcement grew worse today during the Senate Banking confirmation hearing of Mary Jo White to head the Securities and Exchange Commission. Under questioning by Senator Sherrod Brown (D-Ohio), White admitted that even the economy of a foreign country – like Japan– is taken into consideration before bringing a criminal indictment in the U.S.  Even worse, White was forced to admit that while working for the U.S. Department of Justice as the U.S. Attorney for the Southern District of New York (from 1993 to 2002), she considered it appropriate to speak with Larry Summers (a Treasury Secretary in the Clinton administration) to weigh the economic impact of bringing an indictment.

The line of questioning began with Senator Bob Menendez (D-NJ):

Senator Menendez: Ms. White, I get numerous constituent letters concerning the lack of prosecution of wrongdoers. And, basically, when I see the testimony of the Attorney General before the Judiciary Committee when he was asked in this field at the size of some of these institutions are so large that it does – this is quoting from his testimony – “that it does become difficult for us to prosecute them and we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps the world economy.” The question then is, are these institutions in essence protected against prosecution merely by their size and understand that when in fact they do violate the law that they’ll have an extensive fine and that will be the cost of doing business. Cause if that’s the case then I think it subverts the very nature of the honesty and transparency that we want to see in the marketplace.  If the American people and investors believe that entities can do this largely with impunity because they are so big that they cannot be prosecuted then, at the end of the day, then how do I know that the system is not being rigged at a time in which I’m making my investments.  So, as the potential Chair of the SEC, give me your thoughts on what you would do in that regard in terms of when you found wrongdoing, assuming you found wrongdoing, what would you do.

White: Assuming you found wrongdoing, I think you proceed quite vigorously against, frankly, anyone that you find evidence of wrongdoing on but certainly financial institutions. At the SEC, which of course doesn’t have the criminal powers, those collateral consequences are not taken into account before charging decisions are made. So that at the SEC there’s no institution too big to charge. On the criminal side, they’re also, in my view from my former life, institutions are not too big to charge either. But Federal prosecutors are instructed by DOJ – Department of Justice policy – they have a long line of factors to consider and one of them is the collateral consequences of a criminal indictment to innocent shareholders, employees, or the public. And, certainly, prosecutors should consider that before proceeding. But that doesn’t necessarily dictate a “no” decision.

When it came time for Senator Brown to question White, the exchange went as follows:
Senator Brown:  When you were U.S. Attorney, my understanding is you consulted Bob Rubin and Larry Summers when considering whether to bring charges against financial firms. Is that correct?

White:  I actually consulted the Deputy Attorney General who had Mr. Summers call me back. I was asking a factual question.

Senator Brown:  Did they reject the argument that institutions could not be prosecuted to the fullest extent of the law?

White:  I’d like to answer that yes or no but I can’t. Essentially, I was seeking information based on an argument that had been made by the lawyers for the institution that I ultimately indicted, as to whether an indictment of that institution would result in great damage to either the Japanese economy or the world economy. And the answer I got back is that I should proceed to make my own decision; which I took to mean that it would likely not have that impact.

Senator Brown:  Policy seems to have changed.  You a moment ago said, you talked about the SEC doesn’t consider, you used the term collateral consequences to Senator Menendez’ question. And in 2008, the Fed’s General Counsel called the SEC to urge the Commission not to pursue fault penalties against bailed out firms that had committed fraud. As a result, institutional investors, pension funds that provide retirement security for working Americans for example, ended up with less compensation in the settlement. The New York Times affirmed the costs were shifted from Wall Street banks to working Americans. Was the SEC right to lower these penalties back in ’08.

White:  I think what the SEC does do – they don’t, as I understand it, they don’t take collateral consequences into their charging decisions. But they do consider consequences in their remedies. So that, for example, a corporate fine that in effect would have grievous impact on innocent shareholders is taken into account in terms of remedies that they seek. I don’t know all the particulars of the example you’re giving me so I can’t respond any further than that.

Exactly who are these shareholders the U.S. Department of Justice is so concerned with protecting over the overarching public interest of enforcing criminal laws? According to the Economic Policy Institute, as of 2010, the top 5 percent of the wealthiest Americans constitute the majority of shareholders in the U.S., owning 67.1 percent of all stocks while the bottom 80 percent of the population own 8.3 percent.

Is there really an official policy that White refers to that permits the Department of Justice to let economic interests trump the prosecution of criminal acts – acts which brought the economic interests of the country to the greatest collapse since the Great Depression?

There actually is an official policy but its finer points have certainly not been expanded upon by either Attorney General Holder or SEC nominee Mary Jo White.  The policy is called Title 9, Chapter 9-28.000: Principles of Federal Prosecution of Business Organizations.  The policy thoroughly advocates the prosecution of corporations — especially when there is a serial history of fraud as in the case of Wall Street. Here is a sampling:

“The prosecution of corporate crime is a high priority for the Department of Justice. By investigating allegations of wrongdoing and by bringing charges where appropriate for criminal misconduct, the Department promotes critical public interests. These interests include, to take just a few examples: (1) protecting the integrity of our free economic and capital markets; (2) protecting consumers, investors, and business entities that compete only through lawful means; and (3) protecting the American people from misconduct that would violate criminal laws safeguarding the environment…

“A prosecutor’s duty to enforce the law requires the investigation and prosecution of criminal wrongdoing if it is discovered…

“Vigorous enforcement of the criminal laws against corporate wrongdoers, where appropriate, results in great benefits for law enforcement and the public, particularly in the area of white collar crime. Indicting corporations for wrongdoing enables the government to be a force for positive change of corporate culture, and a force to prevent, discover, and punish serious crimes…

“…prosecutors should be aware of the public benefits that can flow from indicting a corporation in appropriate cases. For instance, corporations are likely to take immediate remedial steps when one is indicted for criminal misconduct that is pervasive throughout a particular industry, and thus an indictment can provide a unique opportunity for deterrence on a broad scale. In addition, a corporate indictment may result in specific deterrence by changing the culture of the indicted corporation and the behavior of its employees. Finally, certain crimes that carry with them a substantial risk of great public harm—e.g., environmental crimes or sweeping financial frauds—may be committed by a business entity, and there may therefore be a substantial federal interest in indicting a corporation under such circumstances.

“…Virtually every conviction of a corporation, like virtually every conviction of an individual, will have an impact on innocent third parties, and the mere existence of such an effect is not sufficient to preclude prosecution of the corporation.”

There is a section which allows prosecutors to consider collateral consequences such as harm to shareholders, pension holders, and employees, but it appears as number 7 on a list that gives a higher priority to considering the “pervasiveness of wrongdoing within the corporation, including the complicity in, or the condoning of, the wrongdoing by corporate management; the corporation’s history of similar misconduct, including prior criminal, civil, and regulatory enforcement actions against it .”

Attorney General Eric Holder hails from the corporate law firm Covington and Burling, which has heavy ties to Wall Street. The head of Holder’s criminal division, Lanny Breuer, hails from the same firm. White is a partner at Debevoise and Plimpton and has represented JPMorgan, Morgan Stanley and UBS. Her husband, John W. White, is a partner at a Wall Street law firm, Cravath, Swaine & Moore. It’s becoming crystal clear that the problem in America is not bad laws; the problem is finding someone other than deeply conflicted Wall Street lawyers to enforce them.

#           #         #

© 2013 Wall Street On Parade. Wall Street On Parade ® is registered in the U.S. Patent and Trademark Office. is a public interest web site operated by Russ and Pam Martens to help the investing public better understand systemic corruption on Wall Street. Ms. Martens is a former Wall Street veteran with a background in journalism. Mr. Martens' career spanned four decades in printing and publishing management.

#           #         #

If you'd like to read more on this story, you may also want to checkout Pam Martens' latest "Publisher's Pick": William Greider's piece in the April 1st edition of The Nation, "Sherrod Brown Goes After the Big Banks."

Originally posted to on Wed Mar 13, 2013 at 11:20 PM PDT.

Also republished by ClassWarfare Newsletter: WallStreet VS Working Class Global Occupy movement.

Your Email has been sent.
You must add at least one tag to this diary before publishing it.

Add keywords that describe this diary. Separate multiple keywords with commas.
Tagging tips - Search For Tags - Browse For Tags


More Tagging tips:

A tag is a way to search for this diary. If someone is searching for "Barack Obama," is this a diary they'd be trying to find?

Use a person's full name, without any title. Senator Obama may become President Obama, and Michelle Obama might run for office.

If your diary covers an election or elected official, use election tags, which are generally the state abbreviation followed by the office. CA-01 is the first district House seat. CA-Sen covers both senate races. NY-GOV covers the New York governor's race.

Tags do not compound: that is, "education reform" is a completely different tag from "education". A tag like "reform" alone is probably not meaningful.

Consider if one or more of these tags fits your diary: Civil Rights, Community, Congress, Culture, Economy, Education, Elections, Energy, Environment, Health Care, International, Labor, Law, Media, Meta, National Security, Science, Transportation, or White House. If your diary is specific to a state, consider adding the state (California, Texas, etc). Keep in mind, though, that there are many wonderful and important diaries that don't fit in any of these tags. Don't worry if yours doesn't.

You can add a private note to this diary when hotlisting it:
Are you sure you want to remove this diary from your hotlist?
Are you sure you want to remove your recommendation? You can only recommend a diary once, so you will not be able to re-recommend it afterwards.
Rescue this diary, and add a note:
Are you sure you want to remove this diary from Rescue?
Choose where to republish this diary. The diary will be added to the queue for that group. Publish it from the queue to make it appear.

You must be a member of a group to use this feature.

Add a quick update to your diary without changing the diary itself:
Are you sure you want to remove this diary?
(The diary will be removed from the site and returned to your drafts for further editing.)
(The diary will be removed.)
Are you sure you want to save these changes to the published diary?

Comment Preferences

Meteor Blades, skybluewater, bink, Renee, Thumb, ginabroom, Alumbrados, Angie in WA State, cslewis, Mimikatz, Sylv, DeminNewJ, raboof, RF, LeislerNYC, jillian, PrahaPartizan, Chi, hannah, jexter, hester, murphy, eleming, texaseditor, glitterscale, Liberal Thinking, Linda Wood, tikkun, importer, mickT, Maxlongstreet, dfarrah, badger, TrueBlueMajority, Powered Grace, NYmom, mimi, emal, Shockwave, wu ming, Minnesota Deb, donna in evanston, Wintermute, billlaurelMD, CleverNickName, LuvSet, hyperstation, Jay C, OLinda, LEP, Aspe4, mslat27, willyr, xynz, polecat, HootieMcBoob, blksista, expatjourno, hubcap, Creosote, Doctor Who, Heart of the Rockies, JLFinch, rasbobbo, Gustogirl, opinionated, TheMomCat, concernedamerican, bronte17, susans, TracieLynn, afox, cskendrick, wonkydonkey, susakinovember, whenwego, Agathena, ask, MillieNeon, boadicea, chuckvw, Bionic, cosmic debris, scamp, phillies, farmerhunt, roses, Ignacio Magaloni, jalbert, PeteZerria, Bill Roberts, Nate Roberts, ctsteve, nupstateny, splashy, sidnora, abs0628, jdmorg, suzq, ammaloy, dangoch, tidalwave1, scorpiorising, dejavu, psnyder, Nag, hangingchad, emmasnacker, TexDem, Dallasdoc, Miss Jones, figbash, pat bunny, Eyesbright, brainwave, Noodles, roseeriter, manwithlantern, Chirons apprentice, Steven Payne, hoof32, defluxion10, betson08, Calidrissp, lcrp, riverlover, Brian82, MeToo, dkmich, Oaktown Girl, AllisonInSeattle, zerelda, ybruti, Deward Hastings, ScienceMom, jcrit, TexasLefty, Emmy, vacantlook, eve, rambler american, solesse413, llellet, oortdust, sawgrass727, Gowrie Gal, WCFoster, sb, rapala, nailbender, joanneleon, Recovering Southern Baptist, humphrey, ExStr8, maybeeso in michigan, Bluesee, marina, radarlady, 3goldens, jrooth, Jeffersonian Democrat, Ckntfld, UncleCharlie, gerard w, auditor, Seldom Seen, SherwoodB, ek hornbeck, Shrew in Shrewsbury, Erik the Red, sc kitty, run around, grimjc, DocGonzo, Bcre8ve, basquebob, dewtx, dances with beagles, stagemom, Brooke In Seattle, YucatanMan, Laurence Lewis, Gary Norton, reflectionsv37, ratzo, boofdah, owlbear1, bleeding blue, LNK, majcmb1, Sun Tzu, where4art, jcitybone, skralyx, Ice Blue, most peculiar mama, jane123, RichterScale, Sandino, kaliope, LucyandByron, Isara, Savvy813, WisePiper, Shotput8, Rusty in PA, sodalis, Rogneid, bookwoman, murasaki, mightymouse, kathny, Oye Sancho, Paper Cup, xaxnar, Jim R, CJnyc, Jim P, Philpm, berko, Mother Mags, martini, third Party please, esquimaux, velaski, hlee1169, chicagoblueohio, WB Reeves, tarheelblue, Patriot Daily News Clearinghouse, Keone Michaels, Medium Head Boy, cybersaur, Mr Bojangles, BlueInARedState, tobendaro, dharmafarmer, profundo, tonyahky, Gorette, Yellow Canary, seefleur, martyc35, AoT, The Wizard, arlene, raincrow, kck, NBBooks, triv33, praenomen, MJ via Chicago, global citizen, Ltddy, The Hindsight Times, Rosaura, gooderservice, Libby Shaw, real world chick, joe shikspack, Sagebrush Bob, NearlyNormal, Preston S, el cid, tommyfocus2003, sceptical observer, llbear, Turbonerd, onionjim, thenekkidtruth, IL clb, profh, Persiflage, Timothy J, doingbusinessas, Clive all hat no horse Rodeo, Lovo, kurt, Statusquomustgo, Tom Anderson, AllanTBG, markthshark, Little, OHdog, Aaa T Tudeattack, janetsal, cpresley, BentLiberal, Thinking Fella, One Pissed Off Liberal, old wobbly, Sapere aude, pgm 01, dov12348, timewarp, fisheye, hooper, Cronesense, Habitat Vic, wa ma, Haningchadus14, Loudoun County Dem, SpecialKinFlag, byDesign, FWIW, Debs2, devis1, ColoTim, offgrid, paz3, CenterLeft, yoduuuh do or do not, jds1978, FishOutofWater, DvCM, LillithMc, Mary Mike, yowsta, tbirchard, david mizner, Ticonderoga, terabytes, deepeco, DWG, suejazz, sfbob, Ninepatch, Shadowmage36, Seneca Doane, artisan, HCKAD, jayden, Midwesterners, Aunt Martha, jamesia, jnhobbs, carpunder, Librarianmom, CT Hank, GeorgeXVIII, leonard145b, madgranny, nils o, janatallow, homerun, Don midwest, TomP, cville townie, cynndara, rogerdaddy, gundyj, misterwade, Justus, angry hopeful liberal, wayoutinthestix, rontun, MikePhoenix, poligirl, Youffraita, Aureas2, Involuntary Exile, elwior, filby, Buckeye Nut Schell, KJG52, Therapy, monkeybrainpolitics, willipr, Calamity Jean, Lujane, tofumagoo, jobu, boatjones, hwmnbn, Hanging Up My Tusks, icebergslim, Jeff Y, catly, home solar, Tam in CA, mofembot, temptxan, Gemina13, petulans, 3rdOption, Al Fondy, priceman, Nica24, sagansong, Old Surgeon, Mayfly, tuckerm, Marnie1, LaFeminista, Fiddlegirl, clent, bluebelle7, maggiejean, Bule Betawi, pileta, Rhysling, cybrestrike, J M F, Zorge, arendt, ARS, greengemini, lostinamerica, Pariah Dog, bobatkinson, dharmasyd, bsmechanic, Carol in San Antonio, gharlane, tari, maryabein, Gorilla in the room, Apphouse50, shopkeeper, mkor7, JesseCW, bekosiluvu, dRefractor, petral, TheOpinionGuy, jomi, Alise, kevinpdx, IreGyre, Thutmose V, sfarkash, astral66, spicecakes69, Randtntx, Leftcandid, catilinus, Words In Action, ruscle, Railfan, Just Bob, hotdamn, parse this, brentbent, coppercelt, awcomeon, The Jester, piers, Anima, biggiefries, Crabby Abbey, jakedog42, LOrion, mjbleo, RJP9999, Eddie L, gulfgal98, samanthab, pixxer, ItsSimpleSimon, Puddytat, Kristina40, DerAmi, albrt, addisnana, Johnny Q, Publius2008, Betty Pinson, orlbucfan, ericlewis0, cocinero, Oh Mary Oh, stevenaxelrod, slice, Onomastic, Maximilien Robespierre, Colorado is the Shiznit, yellow cosmic seed, allenjo, ladywithafan, slowbutsure, implicate order, jm214, vahana, freesia, swale44, Susipsych, Bluerall, FarWestGirl, mikejay611, Nicci August, lillyspad, CoExistNow, trumpeter, boomerchick, Haf2Read, marleycat, PorridgeGun, Ace Nelson, thomask, Wolf10, incognita, slooterdam, KVoimakas, wintergreen8694, PhilJD, Liberal Mole, poliwrangler, Wood Dragon, VTCC73, la58, stevie avebury, StateOfGrace, Marihilda, Book of Hearts, imlpdx, JenS, dradams, DRo, Regina in a Sears Kit House, big mouth, Mentatmark, barrylkvw, caryltoo, bassinduo, No one gets out alive, Azazello, Mathazar, BlueDragon, livingthedream, stormicats, anodnhajo, cwsmoke, Williston Barrett, greenbastard, Mindful Nature, molecularlevel, Citizenpower, charliehall2, IndieGuy, MsLillian, orestes1963, dance you monster, LefseBlue, The Lone Apple, Joieau, a2nite, 420 forever, 2thanks, Horace Boothroyd III, cynfowler, This old man, Mr Robert, peachcreek, TBug, Buckeye54, lunachickie, jennyp, rat racer, freshwater dan, marty marty, Glen The Plumber, dotdash2u, AZ Sphinx Moth, Robynhood too, BradyB, CalBearMom, WheninRome, Quasimodal, madcitysailor, BobTheHappyDinosaur, Silvia Nightshade, Chaddiwicker, Dr Erich Bloodaxe RN, TheMeansAreTheEnd, jbob, Late Again, remembrance, JayRaye, glorificus, josmndsn, Dustin Mineau, Raggedy Ann, 84thProblem, goodpractice, weck, gypsytoo, SixSixSix, unfangus, sfbaytransplant, ggfkate, RiveroftheWest, Jerry Hicks, howabout, Icicle68, Smoh, BadKitties, xulon, The Story Teller, Fabiano1, Ishmaelbychoice, pragmaticidealist, Jim Domenico, BroadwayBaby1, OregonWetDog, Kombema, starduster, skepticalcitizen, TheDuckManCometh, footNmouth, central oregon progressive, OldSoldier99, citylights, Capt Crunch, Patrick Costighan

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site